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There is, as ever much to enjoy in reading Rebecca Smart’s analysis over on The Bookseller. One thing that stands out for me though is the ease with which she talks about topics that rarely get flagged up in publishing discussions, things like working capital and cash flow, critical elements in the world of books, physical or digital that perhaps more often than makes sense get relegated to the back room while the cool topic like art, literature and the rest get all the attention and discussion:

The current trade publishing sales process means that money and time are invested in 15 to 18 months’ worth of books at any given point. If we could reduce the length of the pipeline for most of the books we publish we would be able to invest more in each book – and the fact that the business of publishing would become less working capital-intensive would improve its chances of survival and therefore of continuing in its important role of finding and developing talent.

5. As the way people consume media changes, book publishers are realizing they are content creation and rights management companies and not just book publishers. Many of them are now playing in the app market, educational technology market and other areas they likely wouldn’t have dreamed of a decade ago. To that end, book publisher Houghton Mifflin Harcourt recently capitalized by going public in November. The company is seen as more of an educational company and less as a book publisher by Wall Street. In fact, one-time trade publisher Wiley has almost completely transformed itself into an education and technology company partially through a series of divestments and acquisitions.

Lurking in a seemingly not related post about how the iconic Apple product is slowly becoming less important to Apple, is a great few lines about the nature of the music business and, more generally, the content business at a meta level:

One could argue that trying to charge a little extra and make more profit is more trouble than it’s worth for Google or Apple (or even profit-hungry Amazon) – better to offer it at cost or thereabouts to enhance the value of the broader platform, which is where the real money comes from (advertising and devices respectively).

The same thing is happening in books and video – content is a condition of entry to the platform game that you provide at cost. This obviously makes life pretty tough for startups – it’s hard to try to build your own ebook store or download-to-own music store right now when any device your customers might use probably already has an at-cost service built-in. The one place this might be different is in video, since in that business it is actually possible to have unique content – but of course this is very expensive.

Coming on the heels of their decision to offload MPS, this suggests that Macmillan are very keen to concentrate on publishing, at least in India. It’s funny though, it’s almost as if they were tidying up their look for something.

The acquisition, which includes MPIL’s printing operations in Chennai, with a deliverable capacity of about 6 million books annually, would strengthen Repro’s foothold in the South Indian market.

Commenting on the deal, MPIL Managing Director Rajiv Beri said: “Printing is not our core activity and we would like to focus on publishing growth. This is a strategic decision which will further consolidate our investments and energies in development and delivery of quality, need-based content.”

Clock this one up to a great real-world play that adds value to an existing portfolio of titles and content while also building on Osprey’s digital potential. Old House seems like the perfect fit for Shire and like some of Bloomsbury’s recent acquisitions the opportunities to create something that extends the brand into digital publishing is very real. Oddly enough too, the acquisition suggests that Richard Charkin’s comments at the ‘Are Publisher’s Relevant?’ debate yesterday about how the new digital age makes strict focus (here’s hoping I didn’t pick him up incorrectly) less important when building list has a real-life example, Osprey the home of a heritage, a military and a science-fiction imprint!

Rebecca Smart, Osprey Groups Managing Director, said:Old House is my ideal addition to the Osprey family. Weve worked incredibly hard with Shire over the last four years, and with real success, to establish ourselves as a major force in the British heritage market. The addition of Old House, especially bearing in mind our plans to grow and diversify its list, will really help to consolidate our position in that sector.

This series is designed to talk about some of the things I’ve been lucky/crazy/happy to get shipped (as Seth Godin might put it) in the last few months. The first post talked about The Irish Story’s first five Apps. This post is going to talk about the IPN Premium Annual Report On Irish Publishing. It might be a little long.

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Where it came from
I suppose I should say that IPN Premium is the paid for imprint of Irish Publishing News, the industry website I run that covers Irish publishing news, features and stories. The idea behind the site was to create a resource for the Irish publishing community. I have another post coming about the site itself, so I’ll leave it at that for now.

IPN Premium then comes from a realisation that Irish publishing, as distinct from other industries, is poorly served by business intelligence and business advice. There is little in the way of market resources with the exception of Nieslen’s impressive but flawed Bookscan service for the Irish Consumer Market. I say flawed because while the most comprehensive analysis available, it covers a debatable portion of the market from 60-75% depending on whose figures you accept. I wanted to change that.

The Irish bookselling industry is worth somewhere in the region of €200 million and has sales of around 18-20 million units a year. That’s not small beer, the industry shouldn’t be relying on guesses, educated or not, about industry information.

What’s more, with the approach of digital publishing and the likelihood that a portion of those sales will shift online into purely digital form over the next five years, it would be crazy not to have a dedicated source of professional information for publishers, booksellers and authors to work from.

The Report itself
So I set to creating the first product, the IPN Premium Annual Report on Irish Publishing which is, at over 30 pages, longer than I intended and filled with more information than I realised it could possibly hold.

It is also reasonably priced because while all that I’ve said above remains true, many smaller publishers don’t have large resources available to them to buy reports.

If you haven’t bought it, and you find publishing interesting you can do so by clicking here.

Over the next few years, the report will gain features, and several aspects of it will change, but I’m very pleased with the first iteration and I hope those who have bought it are too.

There is much more to come from IPN Premium and indeed from Irish Publishing News itself, but for now, I’m just enjoying the sales as they come and hoping that those who buy it, find it as useful as I intend.
Eoin

UPDATE: The Sunday Times (Ireland) has picked the post up in an edited version for their Think Tank column today.
There has been some debate over whether cannibalisation of print sales by digital sales is actually occurring and what’s more some debate about whether, if it is occurring, it matters a great deal, all mostly prompted by The Bookseller’s recent piece on ebook sales beginning to impact sales of print books:

For example, the e-book market share of the science fiction and fantasy sector globally for the 10 weeks since June was 10%, more than treble the genre’s market share of print book sales. The share taken by romance and saga books was 14%, seven times its print market share.

Julie Meynink, business development director of Nielsen BookScan, said though it was early days, data from Nielsen BookScan US, which globally represents the biggest share of e-book sales, showed a decline in print sales within these two sectors. In the year to date sales of romance books in the US are down 7.5%, while science-fiction and fantasy sales are down, even when the effect of Stephenie Meyer is stripped out. Estimated e-book sales from the Association of American Publishers show that the e-book market has risen 10-times since 2008, with sales accelerating this year with sales over the first two quarters up 180% on 2009.

Ahead of the seminar, Meynink said: “There has been over-performance in the growth in e-book sales in the romance and science fiction categories, when compared to the market share of print book sales, and this correlates with a fall in print book sales in those sectors.”

Sorry for the long quote, you should read the whole piece. The highlighting is mine. I want you think through that bit as you read this. Meynink is telling us that ebooks are pushing aside print sales in specific genres that are at the forefront of digital adoption. No messing there, no room for shifting the territory or fluffing the message – the rise correlates with the fall.

The good news is that the same Nielsen study shows a significant portion of the ereading market buys more ebooks than they did print books. Furthermore, the study also shows that 80% surveyed would never consider buying a dedicated ebook reading device. So in the end, the book-selling world may lose 25% or so of its print customers to ebooks, but those customers will likely buy more product than they would have if they didn’t use an ereader.

Publishers must face the vibrant and growing market of ebooks with a view that their print runs and print sell-through have been and will continue to be downwardly affected by the loss of consumers to ebook reading devices. However, this isn’t cannibalization, it’s an opportunity for market expansion by feeding ereading consumers more of what they want to find.

I Think People Are Misunderstanding The Issue Here
I’m not sold on this market expansion argument. And I’m not sold on it for a specific reason. We are looking at the problem through the wrong end of the lens. The customer isn’t the issue, the publisher is. Simply put, for most publishers and on most titles a 10-20% shift to from print to digital undermines their economic model. Costs per unit will rise and revenue per title will drop if that kind of shift happens, and coping with it won’t be easy.

A loss of 10% or even 20% of print sales when the print run is over 10,000 isn’t catastrophic, especially if ebook revenues bring in some of that lost revenue. It won’t help the economics of a title, but it won’t kill them either. The more you print the less and less it costs per unit and the more and more room for manoeuvre you have regarding price and discounts. Sure, you’ll feel some profit pinch, and your revenue per title will dip, but overall if most of your books sell in excess of 10,000, you will be able to cope with a reduction in the region of 10-20% (though if the digital share grows beyond that it MIGHT become an issue).

But most books are not printed in quantities in excess of 10,000. In fact, in Ireland, I’d warrant that the average print run is circa 3,000 if not a little bit lower. From what I know of the US and the UK, this figure might be slightly higher, perhaps 4-5,000.

Those kind of books (hardback or paperback) are only just viable at current price levels. It’s one of the major issues publishers face. Paper prices have risen dramatically this year, but book prices haven’t risen to reflect that. If publishers are forced to cut print runs on top of absorbing cost increases, the profit per book sold will decrease dramatically.

Looking At It Clinically
If ebook starts to take 20% of a books sales, the print run becomes increasingly non-viable. Only two decisions really remain at that point, reduce costs or increase price.

Suppose a publisher looked to reduce costs, they might cut the print run even more, but each unit would then be more expensive and printers don’t really like doing runs below 3000 so the price might end up being pretty much the same. They could use cheaper materials and thus reduce the attractiveness of the product. They might squeeze the author’s percentage, but authors could self-publish when the deal gets bad enough and if an agent’s involved that’ll probably not happen.

So the other option is to increase the price. This is likely to reduce the demand from readers in the bookstore, and make it harder to get shelf space in physical stores. Even independent bookstores are wary of taking books that they know are more expensive than readers expect and readers have come to expect good prices.

On top of which the higher prices could shift more readers towards digital editions exacerbating the problem that kicked this all off to begin with!

I suspect that leaves the publisher in a pretty tough spot, they are pushed on costs and they have no flexibility on price. They can’t really dramatically increase the price and they cannot dramatically reduce their costs. UNLESS…

They Go Digital
The left-field option is to cut the print cost out of the equation and with it the cost of distribution and go digital only (perhaps with a print-on-demand option) with a title. That changes the economics of the project and is scary as hell for traditional publishers, because then pricing is weird for them, involving only fixed costs and very little in marginal costs per unit sold.

But, and this is the crucial point, if they follow this route, they have the prospect of profitable sales whereas if they stick with a mixed print and digital set up they will lose money.

What would you do?
I suspect that many publishers, those at least who fit squarely into this bracket I’ve described here, will start to see this logic. They will begin to adapt their model to reflect the changes they need to make. They will pull physical books and release ebook editions, at first they’ll also do print on demand or short run digital editions. Over time, they will actively recruit their readers to digital, because they know they have to do these things to survive and profit from the changed realities. It may or may not be enough.

Those that don’t, unless they actually are lucky or good enough to move from titles that routinely sell around 3,000 to titles that sell in excess of 10,000 units, will definitely perish. That’s not fair you might say, but they have the option to change. If they just think it through and start making those changes now or VERY soon.

Of course you see now why we were looking at the problem through the wrong end of the lens, if publishers shift to digital to enable profitable publishing, that may very well mean readers don’t get to choose if they shift to digital because for certain books they may very well be forced to.

Related:
I’ve talked about how this reduction in print runs will affect physical bookshops

Eoin Recommends

Really enjoyed this slice of sci-fi. Powerful sense of setting and character. Very clever use of multi-perspective but single mind characters to throw the reader into a new experience and to challenge the readers perceptions. Nice plot too, decent action and interesting philosophical questions raised to boot!

One of my all-time favourite first books of a series. This is epic in its vision and its scope, it is ambitious in it aims and smashes home with considerable forced. Reeve is to my mind one of the most underrated writers out there. The series weakens a little as it progresses, that I will allow, but Mortal Engines is a true classic that will stand the test of time and no doubt about it!